Eastman Kodak Company (EK) reported disappointing results for the second quarter of 2010 based on lower prices and higher raw material costs. We believe this will continue in the near future based on a slower market recovery.
Thus, we reduced our earnings estimate for the quarter and fiscal year. Moreover, a highly competitive market and Kodak’s huge exposure to volatile products pose immense risks. The company also faces integration and other risks related to acquisitions, strategic alliances, joint ventures, divestitures and outsourcing of transactions.
Moreover, a huge dependence on third party manufacturers and external suppliers negates both top-line and bottom-line results. Thus, we reiterate our Underperform rating on the stock.